Gree Electric looks overseas for expansion

Gree Electric Appliances Inc, China's largest manufacturer of domestic air conditioners, has started construction on a plant in the United States to raise its international prominence and compete against local rivals.

"Construction of the plant is well underway after we set up a branch office in California last year," Dong Mingzhu, Gree's president said.

The company currently makes its products in China, Brazil, Pakistan and Vietnam.

"As a company with high-end technology, we think it (international expansion) is worth exploring if we want to continue to grow and become a global brand," said Dong.

Manufacturing costs are relatively high in the US, especially for labor.

But Dong believed other favorable factors, such as investment policy and infrastructure, will help offset those higher costs and better build Gree's brand in the overseas market.

"After the construction of the plant, we will undertake a process of localization in the US," Dong said.

In 2011, Gree's sales increased by 37.5 percent to reach 83.6 billion yuan ($13.2 billion), the company said on its website. The international market accounted for nearly one-seventh of sales, according to Dong.

"With the establishment of the US plant, we will see a bigger sales contribution from the international market in the years ahead," Dong said.

The company expects sales to reach more than 100 billion yuan this year, rising to 200 billion yuan by the end of China's 12th Five-Year Plan (2011-2015).

Gree's plan for international expansion is well in line with the government's "go global" strategy, which was emphasized in Premier Wen Jiabao's government report during the annual session of the National People's Congress.

"We will guide Chinese enterprises, under various forms of ownership, in making overseas investment, mergers and acquisitions in energy, raw materials, agriculture, manufacturing, the service industries, and infrastructure in an orderly manner," Wen said.

However, Dong, also a NPC deputy, said that at present the company has no plans for mergers or acquisitions with overseas companies.

"As a Chinese manufacturer, we want to be presented as a real Chinese brand in the overseas market. We are not bringing our products to the overseas market, but exporting our technology and brand," he said.

The company has always placed the highest priority on improving technology and self-innovation when adopting an international approach, Dong said.

She added that Gree will take careful steps to increase its prominence in Europe if conditions there are ripe.

"Only after we have a bigger share of an overseas market will we plan to open a manufacturing base there. We have to first build a close relationship with local customers," she said.

In the domestic market, Gree will concentrate on commercial and energy-saving air conditioners after raising additional capital of almost 3.3 billion yuan earlier this year.

"Commercial air conditioners will become a main growth engine for us in the domestic market," Dong said.

The company's sales of commercial air conditioners are growing by 40 percent annually, which has helped Gree become the country's fourth-largest manufacturer in the industry.